Cut Sops To Farm Sector, Invest In Rural Areas: World Bank

New Delhi, Jan 28: | Updated: Jan 29 2004, 05:30am hrs

The World Bank has suggested that India should not join the race in extending irrational subsidies to the farm sector.

It has admitted that the huge subsidies being given by the developed countries have depressed global prices and thereby injuring the interests of the Third World farmers. But in view of deteriorating fiscal health it would be wise for India to target subsidies and go for greater investment in rural areas.

World Banks director for agriculture and rural development Kevin M Cleaver, in an interaction with the media here on Wednesday, said that the total support given to the farm sector in Organisation of Economic Co-operation and Development (OECD) countries is $315 billion on an average per year. Out of this total amount, $235 billion is the direct support to farm producers, $26 billion is the support rendered by the consumers through the pricing policies and $54 billion is the government support by way of general services, including research. This support of $54 billion falls under Green Box measures, he said.

New Model To Hedge Risks

World Bank economist Ulrich C Hess suggested the Indian farmers to take up the pilot project weather insurance designed by World Bank and IFC. This instrument would help farmers to hedge risks in event of any natural calamity.

Mr Cleaver suggested that the developing countries, particularly the G-22, should ask for phasing out this subsidy of $235 billion for ensuring fair practices in global trade.

He observed that returns from private investment in agriculture in developing countries were low and this was primarily due to low global prices caused by heavy subsidies and support given in OECD countries. Even the projects financed by international donor agencies in developing countries gave low returns, he said and regretted that the total assistance given by the developed countries and the inter-governmental agencies to agriculture in developing countries was just a minuscule of $50 billion per year as compared to the total support of $315 billion given in OECD countries.

World Banks South Asia director for agriculture and rural development Constance A Bernard alleged that unfortunately India had joined the race for rendering subsidy. She estimated that India rendered subsidy to the extent of 5.6 per cent of its agricultural GDP. Ms Bernard was also joined by the World Banks country (India) director Michael F Carter who suggested the need for targeting subsidies to the weaker section in rural areas and greater public investment in rural infrastructure, instead of subsidising the rich farmers for political reasons. Dr Anil Sharma, principal economist with the National Council of Applied Economic Research (NCAER) clarified that Indias subsidy to farm sector was still negative as per the WTO norms. But he favoured targeting of subsidies and public investment in rural infrastructure.